Falling Mercedes sales hit Daimler

Christoph Rauwald, Bloomberg News

A worker assembles Mercedes-Benz E-Class automobiles on the production line at the Daimler AG luxury automobile plant in Moscow, Russia, on Friday, April 19, 2019. Daimler Chief Executive Officer Dieter Zetsche called Russia “an important market for us where we always worked very profitably.” He told Bloomberg after the event, “We do believe there is significant growth potential here.”
, Bloomberg

Daimler AG first-quarter profit slumped after a decline in deliveries combined with rising expenses on new models, as the carmaker gave scant fresh detail on a cost cutting plan announced earlier this year.

“Achieving the financial targets for 2019 has not become easier since the first quarter,” Chief Executive Officer Dieter Zetsche said in a statement. “In order to fulfill them and our strategic return targets again at all the divisions, great efforts and the focused deployment of resources are essential this year and in the years to come.”

Key Insights

Daimler in February vowed to prepare cost cuts to shore up falling profits. Since then, Mercedes-Benz deliveries through March have declined 5.6 per cent with the manufacturer reporting a 16 per cent drop in first-quarter earnings before interest and tax. It still expects group earnings before interest and tax to “rise slightly” this year.

Profitability at the main Mercedes-Benz Cars unit fell to 6.1 per cent from 9 per cent from a year ago. Daimler reportedly considers cutting about 10,000 jobs through voluntary measures as part of 6 billion euros (US$6.7 billion) savings in cutbacks at the cars operations by 2021.

Investors will look beyond first-quarter woes and focus on CEO-designate Ola Kallenius taking over in May, Bloomberg Intelligence analyst Michael Dean said in a report. “We anticipate his new strategic plan will be unveiled this summer.”

Market Reaction

Daimler fell 1.3 per cent to 57.70 euros Thursday, valuing the world’s largest manufacturer of luxury cars and commercial vehicles at 61.7 billion euros. After a dismal 2018, the stock has gained 22 per cent since the beginning of the year, outpacing German rivals BMW AG and Volkswagen AG.

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